IDEAS home Printed from https://ideas.repec.org/a/eee/jrpoli/v59y2018icp291-297.html
   My bibliography  Save this article

Resource tax on rare earths in China: Policy evolution and market responses

Author

Listed:
  • Ge, Jianping
  • Lei, Yalin

Abstract

Rare earths (RE) are critical minerals that are used for economic development. Because it has become increasingly important and widely used, the resource tax has been implemented to solve the negative externality of RE exploitation in China. The resource tax on RE in China has evolved over time and includes three stages: 1) establishment (1993–2010), 2) quantitative changes (2011–2014); and change to a volume-based system and qualitative changes in the ad valorem system (2015 to the present). A computable general equilibrium (CGE) model was developed, and the results show that resource tax reforms would increase the price of RE and curb their production and demand. However, these theoretical market responses were short-lived in reality. For the resource tax reforms to have long-term effects, we must also consider factors such as illegal exploitation, the development of China's domestic RE downstream industries and the emergence of RE alternative products. Finally, additional policies should be formulated that are coordinated with existing policies regarding the resource tax.

Suggested Citation

  • Ge, Jianping & Lei, Yalin, 2018. "Resource tax on rare earths in China: Policy evolution and market responses," Resources Policy, Elsevier, vol. 59(C), pages 291-297.
  • Handle: RePEc:eee:jrpoli:v:59:y:2018:i:c:p:291-297
    DOI: 10.1016/j.resourpol.2018.07.016
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301420718301454
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.resourpol.2018.07.016?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Liu, Huihui & Chen, ZhanMing & Wang, Jianliang & Fan, Jihong, 2017. "The impact of resource tax reform on China's coal industry," Energy Economics, Elsevier, vol. 61(C), pages 52-61.
    2. Mancheri, Nabeel A., 2015. "World trade in rare earths, Chinese export restrictions, and implications," Resources Policy, Elsevier, vol. 46(P2), pages 262-271.
    3. Hoenderdaal, Sander & Tercero Espinoza, Luis & Marscheider-Weidemann, Frank & Graus, Wina, 2013. "Can a dysprosium shortage threaten green energy technologies?," Energy, Elsevier, vol. 49(C), pages 344-355.
    4. Xu, Xiaoliang & Xu, Xuefen & Chen, Qian & Che, Ying, 2015. "The impact on regional “resource curse” by coal resource tax reform in China—A dynamic CGE appraisal," Resources Policy, Elsevier, vol. 45(C), pages 277-289.
    5. John Freebairn, 2015. "Reconsidering royalty and resource rent taxes for Australian mining," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 59(4), pages 586-601, October.
    6. Thampapillai, Dodo J. & Hansen, Jan & Bolat, Aigerim, 2014. "Resource rent taxes and sustainable development: A Mongolian case study," Energy Policy, Elsevier, vol. 71(C), pages 169-179.
    7. Orlov, Anton, 2015. "An assessment of proposed energy resource tax reform in Russia: A static general equilibrium analysis," Energy Economics, Elsevier, vol. 50(C), pages 251-263.
    8. Zhang, Zengkai & Guo, Ju'e & Qian, Dong & Xue, Yong & Cai, Luping, 2013. "Effects and mechanism of influence of China's resource tax reform: A regional perspective," Energy Economics, Elsevier, vol. 36(C), pages 676-685.
    9. Ge, Jianping & Wang, Xibo & Guan, Qing & Li, Weiheng & Zhu, He & Yao, Min, 2016. "World rare earths trade network: Patterns, relations and role characteristics," Resources Policy, Elsevier, vol. 50(C), pages 119-130.
    10. Baldi, Lucia & Peri, Massimo & Vandone, Daniela, 2014. "Clean energy industries and rare earth materials: Economic and financial issues," Energy Policy, Elsevier, vol. 66(C), pages 53-61.
    11. Fernandez, Viviana, 2017. "Rare-earth elements market: A historical and financial perspective," Resources Policy, Elsevier, vol. 53(C), pages 26-45.
    12. Han, Aiping & Ge, Jianping & Lei, Yalin, 2015. "An adjustment in regulation policies and its effects on market supply: Game analysis for China’s rare earths," Resources Policy, Elsevier, vol. 46(P2), pages 30-42.
    13. Han, Aiping & Ge, Jianping & Lei, Yalin, 2016. "Vertical vs. horizontal integration: Game analysis for the rare earth industrial integration in China," Resources Policy, Elsevier, vol. 50(C), pages 149-159.
    14. Brown, Maxwell & Eggert, Roderick, 2018. "Simulating producer responses to selected chinese rare earth policies," Resources Policy, Elsevier, vol. 55(C), pages 31-48.
    15. Harold Hotelling, 1931. "The Economics of Exhaustible Resources," Journal of Political Economy, University of Chicago Press, vol. 39, pages 137-137.
    16. Golev, Artem & Scott, Margaretha & Erskine, Peter D. & Ali, Saleem H. & Ballantyne, Grant R., 2014. "Rare earths supply chains: Current status, constraints and opportunities," Resources Policy, Elsevier, vol. 41(C), pages 52-59.
    17. Ge, Jianping & Lei, Yalin, 2017. "Policy options for non-grain bioethanol in China: Insights from an economy-energy-environment CGE model," Energy Policy, Elsevier, vol. 105(C), pages 502-511.
    18. Baumol, William J, 1972. "On Taxation and the Control of Externalities," American Economic Review, American Economic Association, vol. 62(3), pages 307-322, June.
    19. Barteková, Eva & Kemp, René, 2016. "National strategies for securing a stable supply of rare earths in different world regions," Resources Policy, Elsevier, vol. 49(C), pages 153-164.
    20. Smith Stegen, Karen, 2015. "Heavy rare earths, permanent magnets, and renewable energies: An imminent crisis," Energy Policy, Elsevier, vol. 79(C), pages 1-8.
    21. Massari, Stefania & Ruberti, Marcello, 2013. "Rare earth elements as critical raw materials: Focus on international markets and future strategies," Resources Policy, Elsevier, vol. 38(1), pages 36-43.
    22. Fraser, R., 2002. "An evaluation of the relative performance of alternatively structured resource rent taxes," Resources Policy, Elsevier, vol. 28(1-2), pages 1-6.
    23. Imholte, D.D. & Nguyen, R.T. & Vedantam, A. & Brown, M. & Iyer, A. & Smith, B.J. & Collins, J.W. & Anderson, C.G. & O’Kelley, B., 2018. "An assessment of U.S. rare earth availability for supporting U.S. wind energy growth targets," Energy Policy, Elsevier, vol. 113(C), pages 294-305.
    24. Ge, Jianping & Lei, Yalin & Tokunaga, Suminori, 2014. "Non-grain fuel ethanol expansion and its effects on food security: A computable general equilibrium analysis for China," Energy, Elsevier, vol. 65(C), pages 346-356.
    25. Fraser, Rob W., 1998. "Lease allocation systems, risk aversion and the resource rent tax," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 42(2), pages 1-16.
    26. Bhattarai, Keshab & Bachman, Paul & Conte, Frank & Haughton, Jonathan & Head, Michael & Tuerck, David G., 2018. "Tax plan debates in the US presidential election: A dynamic CGE analysis of growth and redistribution trade-offs," Economic Modelling, Elsevier, vol. 68(C), pages 529-542.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wen, Shiyan & Jia, Zhijie, 2022. "The energy, environment and economy impact of coal resource tax, renewable investment, and total factor productivity growth," Resources Policy, Elsevier, vol. 77(C).
    2. Yufeng Chen & Biao Zheng, 2019. "What Happens after the Rare Earth Crisis: A Systematic Literature Review," Sustainability, MDPI, vol. 11(5), pages 1-26, March.
    3. Gao, Cuixia & Xu, Yufei & Geng, Yong & Xiao, Shijiang, 2022. "Uncovering terbium metabolism in China: A dynamic material flow analysis," Resources Policy, Elsevier, vol. 79(C).
    4. Zhang, Zhimin & Elshkaki, Ayman, 2022. "An analysis of the supply-side factors of geological exploration in China based on provincial panel data between 1999 and 2017," Resources Policy, Elsevier, vol. 76(C).
    5. Huang, Jian-Bai & Chen, Xi & Song, Yi, 2020. "What drives embodied metal consumption in China's imports and exports," Resources Policy, Elsevier, vol. 69(C).
    6. Xia, Qifan & Du, Debin & Cao, Wanpeng & Li, Xiya, 2023. "Who is the core? Reveal the heterogeneity of global rare earth trade structure from the perspective of industrial chain," Resources Policy, Elsevier, vol. 82(C).
    7. Nassani, Abdelmohsen A. & Awan, Usama & Zaman, Khalid & Hyder, Shabir & Aldakhil, Abdullah Mohammed & Abro, Muhammad Moinuddin Qazi, 2019. "Management of natural resources and material pricing: Global evidence," Resources Policy, Elsevier, vol. 64(C).
    8. Zhou, Mei-Jing & Huang, Jian-Bai & Chen, Jin-Yu, 2022. "Time and frequency spillovers between political risk and the stock returns of China's rare earths," Resources Policy, Elsevier, vol. 75(C).
    9. Wang, Jie & Liao, Xianchun & Yu, Yue, 2022. "The examination of resource tax reform facilitating firms’ green innovation in resource-related industry in China," Resources Policy, Elsevier, vol. 79(C).
    10. Chai, Song & Zhang, Zhicong & Ge, Jianping, 2020. "Evolution of environmental policy for China's rare earths: Comparing central and local government policies," Resources Policy, Elsevier, vol. 68(C).
    11. Boqiang Lin & Zhijie Jia, 2020. "Supply control vs. demand control: why is resource tax more effective than carbon tax in reducing emissions?," Palgrave Communications, Palgrave Macmillan, vol. 7(1), pages 1-13, December.
    12. Xu, Xiaoliang & Xu, Xuefen, 2021. "Can resource policy adjustments effectively curb regional “resource curse” ? new evidences from the “energy golden triangle area” of China," Resources Policy, Elsevier, vol. 73(C).
    13. Jiang, Hong-Dian & Hao, Wen-Ting & Xu, Qing-Yang & Liang, Qiao-Mei, 2020. "Socio-economic and environmental impacts of the iron ore resource tax reform in China: A CGE-based analysis," Resources Policy, Elsevier, vol. 68(C).
    14. Yi, Jiahui & Dai, Sheng & Cheng, Jinhua & Wu, Qiaosheng & Liu, Kailei, 2021. "Production quota policy in China: Implications for sustainable supply capacity of critical minerals," Resources Policy, Elsevier, vol. 72(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yufeng Chen & Biao Zheng, 2019. "What Happens after the Rare Earth Crisis: A Systematic Literature Review," Sustainability, MDPI, vol. 11(5), pages 1-26, March.
    2. Hau, Liya & Zhu, Huiming & Yu, Yang & Yu, Dongwei, 2022. "Time-frequency coherence and quantile causality between trade policy uncertainty and rare earth prices: Evidence from China and the US," Resources Policy, Elsevier, vol. 75(C).
    3. Zuo, Zhili & Cheng, Jinhua & Guo, Haixiang & McLellan, Benjamin Craig, 2021. "Catastrophe progression method - path (CPM-PATH) early warning analysis of Chinese rare earths industry security," Resources Policy, Elsevier, vol. 73(C).
    4. Chen, Yufeng & Zheng, Biao & Qu, Fang, 2020. "Modeling the nexus of crude oil, new energy and rare earth in China: An asymmetric VAR-BEKK (DCC)-GARCH approach," Resources Policy, Elsevier, vol. 65(C).
    5. Xia, Qifan & Du, Debin & Cao, Wanpeng & Li, Xiya, 2023. "Who is the core? Reveal the heterogeneity of global rare earth trade structure from the perspective of industrial chain," Resources Policy, Elsevier, vol. 82(C).
    6. Schmid, Marc, 2019. "Mitigating supply risks through involvement in rare earth projects: Japan's strategies and what the US can learn," Resources Policy, Elsevier, vol. 63(C), pages 1-1.
    7. Yi, Jiahui & Dai, Sheng & Cheng, Jinhua & Wu, Qiaosheng & Liu, Kailei, 2021. "Production quota policy in China: Implications for sustainable supply capacity of critical minerals," Resources Policy, Elsevier, vol. 72(C).
    8. Shigetomi, Yosuke & Nansai, Keisuke & Kagawa, Shigemi & Kondo, Yasushi & Tohno, Susumu, 2017. "Economic and social determinants of global physical flows of critical metals," Resources Policy, Elsevier, vol. 52(C), pages 107-113.
    9. Lin, Boqiang & Jia, Zhijie, 2019. "How does tax system on energy industries affect energy demand, CO2 emissions, and economy in China?," Energy Economics, Elsevier, vol. 84(C).
    10. Zhou, Mei-Jing & Huang, Jian-Bai & Chen, Jin-Yu, 2022. "Time and frequency spillovers between political risk and the stock returns of China's rare earths," Resources Policy, Elsevier, vol. 75(C).
    11. Sun, Xiaohua & Ren, Junlin & Wang, Yun, 2022. "The impact of resource taxation on resource curse: Evidence from Chinese resource tax policy," Resources Policy, Elsevier, vol. 78(C).
    12. Zhü, kèyù & Zhao, Shuang-yao & Yang, Shanlin & Liang, Changyong & Gu, Dongxiao, 2016. "Where is the way for rare earth industry of China: An analysis via ANP-SWOT approach," Resources Policy, Elsevier, vol. 49(C), pages 349-357.
    13. Reboredo, Juan C. & Ugolini, Andrea, 2020. "Price spillovers between rare earth stocks and financial markets," Resources Policy, Elsevier, vol. 66(C).
    14. Zheng, Biao & Zhang, Yuquan W. & Qu, Fang & Geng, Yong & Yu, Haishan, 2022. "Do rare earths drive volatility spillover in crude oil, renewable energy, and high-technology markets? — A wavelet-based BEKK- GARCH-X approach," Energy, Elsevier, vol. 251(C).
    15. Zheng, Biao & Zhang, Yuquan & Chen, Yufeng, 2021. "Asymmetric connectedness and dynamic spillovers between renewable energy and rare earth markets in China: Evidence from firms’ high-frequency data," Resources Policy, Elsevier, vol. 71(C).
    16. Behnaz Minooei Fard & Willi Semmler & Giovanni Di Bartolomeo, 2023. "Rare Earth Elements: A game between China and the rest of the world," Working Papers in Public Economics 235, University of Rome La Sapienza, Department of Economics and Law.
    17. Liu, Huihui & Chen, ZhanMing & Wang, Jianliang & Fan, Jihong, 2017. "The impact of resource tax reform on China's coal industry," Energy Economics, Elsevier, vol. 61(C), pages 52-61.
    18. Paulick, Holger & Machacek, Erika, 2017. "The global rare earth element exploration boom: An analysis of resources outside of China and discussion of development perspectives," Resources Policy, Elsevier, vol. 52(C), pages 134-153.
    19. Xuedong Liang & Meng Ye & Li Yang & Wanbing Fu & Zhi Li, 2018. "Evaluation and Policy Research on the Sustainable Development of China’s Rare Earth Resources," Sustainability, MDPI, vol. 10(10), pages 1-16, October.
    20. Song, Ying & Bouri, Elie & Ghosh, Sajal & Kanjilal, Kakali, 2021. "Rare earth and financial markets: Dynamics of return and volatility connectedness around the COVID-19 outbreak," Resources Policy, Elsevier, vol. 74(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jrpoli:v:59:y:2018:i:c:p:291-297. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30467 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.